Match That!: An Empirical Assessment of Rights of First Refusal in Merger Agreements

Abstract:     
This short paper provides an overview of rights of first refusal (match rights) in merger agreements. Match rights are common in merger agreements, nearly universal. Even though these preemptive rights can be a strong economic deterrent to topping bids, there is little, if any, Delaware case law limiting their use. In fact, one recent chancery court decision endorsed the use of rights of first refusal in order to end an auction where Revlon duties applied. With the Toys r Us case as a backdrop, this paper will attempt to evaluate the competitive effects of rights of first refusal, specifically their impact on the deal premia, number of bidders and the prevalence of “deal jumping.” If the data provide evidence that rights of first refusal are anti-competitive, this paper will make arguments in favor of adopting a rule to limit reliance on match rights when Revlon duties apply.

Number of Pages in PDF File: 16

working papers series